Successful Mergers and Acquisitions in China
In 2007, the 63 disclosed cross-border M&A
transactions had a total transaction value of US$18.67B, an increase of 105.4%
over the previous year, however, there is a cautionary story behind the
headlines.
At a recent China Economic Review conference entitled
"Mergers & Acquisitions - How to avoid the pitfalls and make a success of
M&A operations", IMS was surprised to learn that less than 20% of all
cross-border M&A activity was deemed to be fully successful. According to Ben Qi, Senior Counsel for
IBM Greater China, 53% of M&A fail to meet purchaser objectives due to poor
integration. This HR issue was
also backed up by Mercer and sited by Alvarez & Marshall as a pre-deal
breaker.
Companies like IBM who are involved in acquisitions on
a regular basis have set up permanent Integration Teams to ensure post-merger
success. The author is also aware
of a top private equity firm that has a 50 strong Operations Division dedicated
to the integration process. It is
pretty obvious that having sufficient HR resources (and leadership) for the
integration phase is essential, but it is also hugely valuable to have that
team involved as early as possible before the deal is struck.
A similar theme has been discussed by journalist Pete
Sweeney in the November Issue of EurobIz, the journal of the European Chamber
of Commerce in China. Significant
differences in business cultures between acquiring and target firm mean that
great attention must be paid to the integration phase to ensure a healthy,
integrated operation. Dennis
Unkovic, a partner at law firm Meyer, Unkovic and Scott suggests hiring a
Chinese CEO to run the operation on the ground as an alternative to an
expensive expat that flies in 1 week out of 6. This may be a cheaper solution but not always
successful. This is an
obvious area where a China experienced IMS Interim Manager residing permanently
in China can help, it is just a case of convincing Corporates and Equity Houses
of the value of bringing resource onboard before the deal has been struck.
Other key areas are the retention of key Chinese staff
after the merger or acquisition, especially sales staff as considerable amounts
of business is done via personal relationships in China. Internal relationships should be
considered and looking at achieving harmony between merged teams. IMS Interim Managers have 5-10+
years experience in China working at C-Level and Senior Management level and
have considerable experience in developing mixed teams. Many have decided to reside permanently
in China and have embraced the culture.
Over 20% of our Managers are fluent in Mandarin and another 64% have conversational mandarin skills.
For more information on IMS go to http://www.jmgemini.com/ims
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